Market Monitor, Wednesday, 08/18/2004

8/18/200, 4:43:23 PMMy only fear for the rest of this week is price "pinning" as we approach opex. I think a continuation of this rally will at least require a pullback/consolidation day and that would allow us to exit our overnight hold, SPQUR (SPX Sept 1090 put) @ 16.40, stop 15.80, with minimal damage. If we pull back tomorrow we stand to make a fairly decent profit, even with Sept. contracts. It's just too dangerous IMO to hold front month contracts overnight so close to opex... See you tomorrow.

8/18/200, 4:30:49 PMWell, our original play of the day, SPQHP (SPX Aug 1080 call), that we sold for 10.00, +108.33%, closed the day @ 14.10/16.00, meaning if we had hung on we could have probably closed the play out at EOD for 15.00 and a +212.50% gain... BUT, wasn't it Joseph Kennedy who said "Only the fool holds out for the last dollar." ??? ... and isn't it OI policy to always take profits at +100% ??? ... So, we'll be satisfied with a great day by any standard. We gave back a bit trying to call the top but by staying disciplined with stops still ended up with a +88.15% gain for the day. If we could produce those numbers every day we could all buy our own private tropical islands by the end of the month (or in my case, a private island in Puget Sound).

8/18/200, 3:57:25 PMSo far, that OEX Keltner support holds, with that support now from 533.34-533.70. It looks firm enough to hold into the close.

Those in bullish OEX plays have a decision to make, particularly if they're in front-month options. There's some slight historical resistance in this 535-537 zone, and after that the OEX moves up into the choppy zone from earlier in the year, but the main resistance showing up is possible daily and weekly Keltner resistance. The OEX is hitting the bottom of that possible zone this afternoon. There's been another big-range day today, so that it's possible that even if the OEX is going to break through that zone, it might consolidate a day or two before continuing to climb. It's easily possible that the OEX could see upside to 537 or so before that consolidation or a pullback begins, possibly after a morning spike tomorrow morning, but it could just as easily begin from the current level or even from higher, near 540-541.

Here's my first impression, though, not yet corroborated by an after-hours study of the markets: limited upside now, with a day or so of possible consolidation followed by a drop toward 527 again and a possible steadying there for a day or two before we know final direction. Don't let this first impression guide your decisions, but measure it against your own impressions and then make your own decisions.

What could upset markets tonight? A Yukos bankruptcy. The Shiite cleric deciding not to withdraw his troops after all and an assault by U.S. troops on a shrine considered holy, or a protest by oil workers in Venezuela . . . you get the idea. None of that may happen, but some of it could.

8/18/200, 3:31:16 PMToro Co (TTC) is looking bullish here with an upturn in its technicals and a new "buy" signal in its MACD. The stock has broken its six-week trend of lower highs and has pushed back above its 10, 21 and 100-dma's. The challenge now could be the $65 or $66 level.

8/18/200, 3:21:59 PMIt looks as if the OEX may have already broken above the top trendline of its "bearish" rising wedge on the five-minute chart, and five-minute candles may be gathering above the former top trendline.

Mark Davis

8/18/200, 3:21:24 PMOur put play, SPQTR (SPX Aug 1090 put) @ 3.70, stop 3.30, is still alive and hanging on by it's fingernails. I believe the true spread to be about 3.00/4.00 at this point. We've had negative MACD divergence with price for over an hour now but the index refuses to go lower. It "should" resolve to the downside if you consider that one factor by itself but during scam week anything can happen.

Jane Fox

8/18/200, 3:11:54 PMNo kidding Jonathan, Crude Oil is a market we really do want to see plunge.

Jonathan Levinson

8/18/200, 3:09:53 PMNymex crude hit a new record high of 47.40 today. This reminds me of those daze in 2000, when Maria chortled "a new record for the Nasdaq" day after day. Hopefully the current move will end the same way.
Link

8/18/200, 3:07:26 PMThe OEX is now hitting Keltner support that should be significant on the five-minute chart, perhaps serving as the trampoline that will spring the OEX into the close. If that support springs a leak instead and the OEX slips below the 532.80 zone and then 532.38, bulls should be careful of a fall beneath today's supporting trendline, now crossing at just above 532.

Linda Piazza

8/18/200, 3:04:16 PMThe OEX hasn't gotten far since breaking through the neckline of its inverse H&S and the trading pattern still looks rising wedge-ish (one of those bearish formations that usually resolves to the upside lately--grin). Still, I certainly wouldn't discount the possibility of a swoop higher into the close.

8/18/200, 2:58:01 PMQQQ update at this
Link
shows rising 30 min channel support to 33.48 now. Despite a large volume sell program, the decline in price off the high is minimal, with fib support at 33.69 (former resistance) so far supporting this consolidation rectangle near the highs. If it can't go down, it's likely to go up, so watch the day highs of 33.80 against 33.69. A move below 33.69 should be confirmed by a break of 33.64 before assuming that it's a directional downside move.

James Brown

8/18/200, 2:57:16 PMPar Pharmaceuticals (PRX) just now broke out over round-number resistance at the $40.00 mark. Watch out for the simple 100-dma at $40.77.

Linda Piazza

8/18/200, 2:56:28 PMThe SPX is also challenging its converging 200-ema and 30-sma, with the two converging just above 1092.80 and with the SPX having hit a high of 1092.47.

James Brown

8/18/200, 2:54:53 PMQCOM is trading higher today up 2.5% to $35.83. The stock split 2:1 two days ago. Readers might watch for a breakout over $36.50 as a potential trigger for bullish positions.

Linda Piazza

8/18/200, 2:50:16 PMThe Dow is about to face its 200-ema and its 30-sma, with the two converging near 10,055-1070.

8/18/200, 2:42:35 PMHere's where the SOX is with respect to the 50% retracement of the rally off the October 2002 low, the purple horizontal line, and the former descending regression channel: Link
I've been watching to see if the SOX can manage a daily close above those levels, now converging near 386-387. This should be strong resistance for the SOX, resistance we should have expected to be retested. Now the result of the retest, not the fact that it was retested, will tell us more about strength or weakness. I wouldn't be surprised if a fast-moving index like the SOX sees some shorts get shaken out and the index overruns that resistance into the close, however, but I would wonder about the possibility that the SOX would then pause somewhere above that line and below 394 or possibly 400 and consolidate for a while before determining final direction.

The RLX retail index is up four days in a row and challenging resistance at the 390 level and its simple 200-dma.

Mark Davis

8/18/200, 2:41:25 PMJeff do you get the impression they will try to hold the Dow above 10,000 into the close?

Jeff Bailey

8/18/200, 2:40:12 PMTRIN 0.53 ...

INDU 10,033

James Brown

8/18/200, 2:33:49 PMZebra Technologies (ZBRA) is up 2.7% with a new MACD "buy" signal and pushing through the simple 40 and 50-dma's as the stock near resistance at $84.00. Traders can use a breakout over $84.30 as a potential trigger with a $90 target.

Linda Piazza

8/18/200, 2:33:17 PMHere's the BIX's trading pattern with regard to its orthodox broadening pattern: Link
There's been a breakout here, too, with a bullish cross on the MACD (not shown). There's still bearish price/MACD divergence remaining, however, although it can be erased. I'm always the worrier, but I'm worried about this being a false breakout.

James Brown

8/18/200, 2:30:41 PMTelephone + Data Systems (TDS) is edging toward the top of its recent trading range and nearing new two-year highs. Readers could watch for a breakout over the $78.00 mark.

Linda Piazza

8/18/200, 2:28:44 PMHere's the chart of the inverse H&S on the OEX that I posted on the site earlier today: Link
Obviously, the neckline has been breached. Remember that many inverse H&S's haven't been meeting their upside targets lately. Guess one sign that the downtrend is over is when they starting meeting their targets and regular H&S's stop doing so.

James Brown

8/18/200, 2:28:03 PMMohawk Industries (MHK) is pushing through its simple 100-dma and cracking its simple 200-dma as it attempts to breakout from its three-month trading range. Traders can look for a move over $75.50 as a potential trigger for new longs.

Mark Davis

8/18/200, 2:27:51 PMI'm showing a very clear sell signal right now for SPX but in a trending market my system gives lots of false signals.

The long play we sold this morning, SPQHP (SPX 1080 call) for 10.00 is currently bidding 12.50/14.00... Wow!

James Brown

8/18/200, 2:26:20 PMStrength in the financials has finally lifted New York Community Bank (NYB) above resistance at the $20.00 mark. This looks like a bullish entry point for more patient investors.

Jonathan Levinson

8/18/200, 2:25:33 PMThe current high is QQQ 33.80, with QQQ currently trading 33.73. Bears would need to see a move below 33.64 before considering this anything more than a consolidation at the highs. While the short cycle oscillators are looking for a downphase, those oscillators have no problem trending in overbought territory for hours, and so its safer to base short term bias on the behaviour of price above 33.64 or below 33.82 price confluences and simply to follow the breakout/-down should it occur.

Linda Piazza

8/18/200, 2:25:19 PMThe Keltner-style bearish divergence on the OEX's five-minute Keltner chart obviously did not continue. The price/MACD bearish divergence does continue, however. Now Keltner support is trying to converge near 532. If that support does converge and support the OEX, the breakout signal will be preserved. This rise is looking a little rising-wedge-like, however, so bulls should be following the OEX up with their stops, especially as it heads up into the next resistance band near 535-537.

Mark Davis

8/18/200, 2:22:23 PMGreedy MMs are raising the spreads to obscene levels... current spread on SPQTR (SPX Aug 1090 put) is a mind-boggling 66.67%. Volatility premium could account for part of this but IMO this is legalized robbery.

James Brown

8/18/200, 2:21:26 PMKOS Pharmaceuticals (KOSP)'s trend of higher lows has blossomed into a new three-month high today. The stock's rally is also pushing shares above its exponential 200-dma. This looks like a bullish entry point but I'd be worried about the simple 200-dma above $40.00.

8/18/200, 2:16:28 PMSwing trade close out put alert .... close out the JDSU August $3 puts (buy them back at loss) of $0.20 per contract.

Jonathan Levinson

8/18/200, 2:15:09 PMQQQ finally breaks to new highs. Looking for a test of 33.78-.82. That's going to be tough resistance.
Link

Linda Piazza

8/18/200, 2:14:22 PMYesterday and this morning, I warned that a time might come soon when there was a disconnect between the usual inverse trading pattern of crude futures and equity prices. Markets might begin to discount the topping out of crude prices while they were still headed up, and equities might begin to climb along with crude prices. Didn't think it would happen so soon, however. Today may be an aberration, but it was an effect that I (and others, of course) anticipated at some point.

8/18/200, 2:12:35 PMDefense Index (DFX.X) 217.55 -0.09% ... charges hard, but only equity sector I show in the red.

Linda Piazza

8/18/200, 2:11:45 PMI'm turning now to daily and weekly Keltner chart. As I mentioned in my first OEX-related post this morning, the OEX had closed both Monday and Tuesday above a Keltner line that it needed to maintain in order to present the possibility of climbing to the next Keltner level. That level is now at 535.47-536.31. It looks strong enough to hold the OEX, although I do see a possibility of the channels being nudged up toward 540-541 if the OEX butts against it hard enough. The weekly chart suggests that 534.40-535.40 may be the top of the current climb. If in bullish trades, congratulations, first. Second, make plans to protect profits beginning now and up to those levels.

8/18/200, 2:07:05 PMThe other indices are breaking to new highs, but NQ and QQQ continue to stick.

Linda Piazza

8/18/200, 2:06:33 PMGuess Mark will have to take back the toaster oven as I thought it likely that the OEX might stall after an initial pop.

If the bearish divergence, Keltner style, is going to continue on the OEX's five-minute chart, it probably needs to end this five-minute period below the Keltner line currently at 532.12, something the OEX doesn't seem inclined to do so far . . . and didn't do as that five-minute period closed. There's a little leeway with this figure, however, as the smallest channel has not yet broken above the widest channel, so the divergence still exists. It will soon be erased unless the OEX is slapped back quickly, however.

Jeff Bailey

8/18/200, 2:06:11 PMTRIN 0.56 .... approaches morning low of 0.54.

Jeff Bailey

8/18/200, 2:05:36 PMDow Industrials (INDU) 10,024 +0.5% .... gets a trade at WEEKLY R2. Needs about 10-point more for Popeye to open up a can of spinach

Mark Davis

8/18/200, 2:03:36 PM Day Trade Exit Point Alert -
Stopped out... SPQTQ (SPX Aug 1085 put) @ 2.90, -9.37%
I should have listened to Linda. She may be modest but she knows her stuff.

8/18/200, 2:01:01 PMQQQ is back in the vicinity of session highs with ER, ES and YM futures all printing new highs.

Jonathan Levinson

8/18/200, 1:57:32 PMCrude oil is up to 47.10 here. Chart at this
Link.

Jonathan Levinson

8/18/200, 1:56:23 PMQQQ has respected a 20 cent range since 10:45AM, and is currently closer to the top of that range than to the bottom. The short cycle oscillators are perfect mixed, though I see green volume increasing along with price. The channel remains flat- little action here.

8/18/200, 1:46:04 PMHey, I don't have a toaster oven, so I'll look forward to that prize. Now we have to see if I get the second prize, whatever that might be, which depends on whether the markets stall now or not. Really, though, it was just a best-guess answer, based on what was happening with the Keltner channels.

Jonathan Levinson

8/18/200, 1:43:22 PMSession high here for Russell2K futures.

Jonathan Levinson

8/18/200, 1:42:51 PMA break above 33.78-.82 shoud be good for a move to 34.00-34.04 as the 30 min cycle upphase reasserts itself. But 30 and 60 min channel tops are lined up at 33.70 and should provide formidable resistance on any attempt.

James Brown

8/18/200, 1:41:44 PMPIXR is also seeing some follow through on its recent bullish breakout.

8/18/200, 1:41:15 PMDon't look now, but the TRAN erased this morning's losses and climbed, rising up to test yesterday's resistance, the 30-dma. It's just below that average now. So far, the TRAN has not been able to top yesterday's high or that of August 11.

James Brown

8/18/200, 1:40:31 PMThe XBD broker-dealer index is still climbing. The XBD is bouncing from a test of the 120 level this morning. Likewise Lehman Brothers (LEH) is bouncing from its lows near the simple 50-dma. LEH looks like a decent bullish candidate with the double-bottom in place but shares have lots of congestion overhead.

Jonathan Levinson

8/18/200, 1:39:47 PMAnother bounce is in progress above 33.44 QQQ, running counter to the ongoing short cycle downphase. The 30 min cycle channel is still flat, and provided that double top resistance at the session highs holds, the 30 min cycle rollover should continue to develop.

James Brown

8/18/200, 1:37:12 PMLooks like traders have bought the dip in KMRT when it traded toward the $74.25 level this morning. The stock is now up 3.5% to $77.81. Its MACD has is in a new "buy" signal that's only two days old.

James Brown

8/18/200, 1:33:37 PMOuch! We put EASI on the watch list last night as a bearish candidate. Today the stock is down more than 12% on more than 10 times the average volume. The only thing I can find are some comments that the company may have had its earnings estimates cut by a research firm today.

8/18/200, 1:27:46 PMDateline WSJ - In a sweeping reduction in the terms of Google Inc.'s planned initial public offering, the Internet search engine Wednesday slashed both the estimated price of its IPO shares and the size of the offering.

Following the company's move, the Securities and Exchange Commission is expected to provide formal approval later Wednesday for Google to begin selling shares, according to people familiar with the matter. Google's stock could start trading on the Nasdaq Stock Market as soon as Thursday.

Google's surprise move indicates the IPO auction is drawing lower-than-expected bids, and it means the offering will be far smaller than expected. Instead of raising up to $3.47 billion for the company and existing shareholders, based on its earlier expected price range, the IPO now would generate up to $1.86 billion at the high end of the new range. The company expects to price shares between $85 and $95, down from its earlier expected range of $108 to $135 a share. The change also reduces the high end of Google's expected market capitalization to $25.8 billion from $36.6 billion.

8/18/200, 1:24:04 PMMark, why do you do this to me? Grin. I've always admitted I'm no good at guessing which way it's going to go, just at noticing that there's a pattern of it happening between 1:35-1:55. However . . . ahem. I say up today, but I suspect that it might then stall. Have to see.

Jonathan Levinson

8/18/200, 1:23:12 PMGold has just printed a session high at 407.50, knocking at the door to 408 resistance below the 412-414 confluence. HUI is up .86% at 196.47, XAU up .73% at 90.51.

Mark Davis

8/18/200, 1:22:46 PMLinda which way is the stop-running push going to go today? (no demerits for an incorrect answer)

James Brown

8/18/200, 1:21:00 PMSemiconductor stock ChipMOS (IMOS) is up more than 22% to $4.95 as investors react to its positive earnings report this morning. The next hurdle is the late July highs near $5.33.

James Brown

8/18/200, 1:18:40 PMBrown Shoe Co (BWS) is saying that the back-to-school rush has been a slow one.

Mark Davis

8/18/200, 1:18:22 PMSome minor volatility coming in here but the lower b-band is holding things up (so far)... if we can get another MACD bearish kiss it may start the slide, but that hasn't happened yet and stochastics have been buried at the bottom for longer than I'd like. We really need this thing to start moving to the downside soon or it may pop up to the upper b-band. Link

8/18/200, 1:17:49 PM30 min channel resistance has increased to 33.74 QQQ on the bounce but is again flat on the large volume sell program that whacked it. A short cycle downphase is just commencing. The move made a nominal new high at 33.67, but the 30 min cycle looks and feels like it's in that "weightless" zone as it makes the turn, with price chopping sideways inside the topping channel. If so, a move below 33.44 will set the stage for a test of 33.34, below which we'll see 33.27 and 33.24 support tested next.

My feeling is that the daily cycle is commencing a new upphase, and for that reason I expect the 30 min cycle downphases to continue bottoming at higher price and possibly oscillator lows. That occurred at 33.01 this morning, and extrapolating from there, I'd guess at 33.20-.24 to put up a good fight as support on any retest from here.

Linda Piazza

8/18/200, 1:17:05 PMThe OEX now approaches a converging support Keltner level, at about 530.27. That might be strong enough to steady the OEX or even provide a bounce, although stronger support is down near 529-529.25.

James Brown

8/18/200, 1:16:47 PMTASER Intl (TASR) is up 2.77% and rebounding from the 200-dma region after announcing a new order for $741K from Milwaukee Sheriffs.
Bulls may notice that TASR's MACD indicator is getting close to producing a new "buy" signal.

8/18/200, 1:10:16 PMApparel retailers Ross Stores (ROST) is down 9% to $21.96 and breaking support at the $22 level on big volume after reporting earnings that were inline. Unfortunately, "inline" was a 40% drop in profits from the previous year. The company did say that August business is coming in weaker than expected and visibility has been significantly reduced.

8/18/200, 1:06:39 PMThe OEX is declining over the short-term, as Keltner charts were suggesting that it would do. If the OEX maintains five-minute closes beneath 530.89, it will keep the smallest Keltner chart turned lower, toward 530.22 support. The OEX may now be vulnerable down to mid-channel level on that chart, with that level near 529 currently, but that target depends on those five-minute closes.

James Brown

8/18/200, 1:04:32 PMOnce again Apple Computer (AAPL) is rebounding from its eight-month old rising trendline of support. However, this time AAPL's 2.9% rally is breaking out over all its moving averages.

James Brown

8/18/200, 1:01:23 PMBank of America (BAC) is seeing some follow through on top of yesterday's breakout. Shares broke out above major resistance near $83 back in late May but then churned sideways in a tight $3.00 range for the next 2 1/2 months. Monday saw BAC breakout over the $86 level and Tuesday produced some follow through on that move. Now the stock is trading at levels not seen since August of 1998.

Mark Davis

8/18/200, 1:01:18 PMMACD bearish kiss on the SPX 1-min chart... things are beginning to go our way but I'd like to see a big red candle here pretty soon.

James Brown

8/18/200, 12:58:05 PMAnother chip stock, Mindspeed Technologies (MSPD), is up more than 13% to $2.84 after Needham starts coverage on the stock with a "strong buy".

James Brown

8/18/200, 12:55:37 PMMarvell Technology (MRVL), another semiconductor stock, is up 5.7% to $21.87 and breaking out over its simple 200-dma.

8/18/200, 12:51:47 PMA Reuters article is reporting that an SEC five-member panel voted 5-0 to ban "directed brokerage fees" and voted for more disclosure from fund managers regarding their compensation and any conflicts of interest.

Linda Piazza

8/18/200, 12:49:42 PMSo far, the OEX is finding resistance at the levels indicated on the five-minute Keltner chart. That chart indicates that it's more likely for the OEX to decline over the short-term, perhaps after a continued test of resistance, than to rise, but the 15-minute chart doesn't give a clear picture except that it shows price/MACD bearish divergence, too.

Jeff Bailey

8/18/200, 12:49:27 PMResearch in Motion (RIMM) $57.95 +1.11% .... chart I had put together last night for my watch list at this Link

Mark Davis

8/18/200, 12:48:47 PMIf we don't get quick traction to the downside we'll probably exit this play early.

James Brown

8/18/200, 12:47:07 PMHarman Intl (HAR) is up more than 4.3% to $83.75 after the company reported earnings that beat estimates by 8 cents this morning. The stock is bouncing from the simple 200-dma and its MACD is very close to producing a new "buy" signal.

8/18/200, 12:44:34 PMPotential Day Trade Setup Alert -
I can't resist one more trade before leaving the house...
Get ready to go short with SPQTQ (SPX Aug 1085 put)

Jonathan Levinson

8/18/200, 12:41:22 PMThe 30 min cycle downphase from yesterday whipsawed to the upside this morning and remains in progress after the short cycle pullback to a higher low above 33.44. The short cycles corrected but remain mostly overbought in what I'd characterize as an upside trending move, and the outlook remains bullish above the 33.38-33.48 confluence zone, with the daily cycles giving their first buy signals for QQQ and NQ today. That said, the advance has yet to clear the earlier session high of 33.64, and the 30 min cycle channel is flattened because of that outstanding unchallenged high. If bulls can clear it on this run, look for resistance at 33.70, the site of the current 30 min channel resistance line and the 161.8% fib line off yesterday's range.
Link

Linda Piazza

8/18/200, 12:39:12 PMHere's the next test of the 5-minute Keltner resistance that I mentioned that we should probably expect in my 11:53 post. Keltner resistance ranges from 531.19-531.69. If bearish divergence is to continue, the OEX should probably not have five-minute closes above the channel line currently at 531.69, although there's a little leeway there.

James Brown

8/18/200, 12:33:25 PMMeadwestvaco (MWV), while only up 16 cents, is still breaking out to new 20-month highs over $30.20. Its MACD has just produced a new "buy" signal and its P&F chart points to a $47 target.

8/18/200, 12:30:47 PMOne of my alarms is going off... CREE, a semiconductor stock, is breaking out over 5 1/2 month resistance at $23.50. The stock is up 5.85% today on no apparent news today but I do see a positive article from BusinessWeek online last night. Looks like S&P's Equity Research is making some positive comments on CREE.

8/18/200, 12:19:51 PMThe BIX still has not breached the top of the orthodox expanding formation (megaphone) formation depicted in the chart linked to my 11:03 post. No breakout yet. This is typically a bearish formation when it occurs at the top of a climb, but I sure am tired of writing about typically bearish formations that might break to the upside instead! Watch price action.

Jonathan Levinson

8/18/200, 12:13:20 PM100-tick QQQ chart update at this
Link
shows continued chop along the 33.48 line, with support developing above 33.44. I wouldn't be surprised to see a few more hours of this action, so reminiscent of past op-ex weeks.

8/18/200, 11:53:16 AMHere's a chart depicting the Keltner-style divergence I mentioned in my 11:38 post: Link
Also note the gathering Keltner lines above the current OEX position, with these trying to firm up the resistance. Remember that such divergence can continue while prices continue to fall, but it offers a warning to bulls to be ready to protect profits.

Jonathan Levinson

8/18/200, 11:51:02 AMThe current pullback has a flaggy/corrective feel to it on QQQ, even moreso on the Dow and S&P, but it's lasted long enough to flatten the 30 min cycle channels. Support remains at 33.31, with the 7200-tick SMA at 33.34, the top of much of yesterday's sideways channel.

8/18/200, 11:38:57 AMResistance begins to build above the OEX on the five-minute Keltner chart, with that resistance from the OEX's current position up to 531.48. I'm not sure whether it's yet strong enough to stop the OEX. Readers should be aware that the five-minute chart begins to signal bearish divergence, Keltner style, on that chart. Price should still be the arbiter of your decisions, and we've seen days when the OEX continues to move the prevailing direction all day despite divergences, but just be aware of this development.

Mark Davis

8/18/200, 11:38:34 AMI'd love to stay but duty calls for the remainder of today's trading session...
See you tomorrow

Jonathan Levinson

8/18/200, 11:31:48 AMNo lack of action in crude oil this AM, currently back down to 46.70. Chart at this
Link.

Linda Piazza

8/18/200, 11:31:21 AMWhen H&S's and inverse H&S's start appearing in opposition to each other, I worry about choppy trading conditions and targets that never get met. Here's an inverse H&S possibility on the OEX that we should be watching, either for potential confirmation or rejection: Link
There was bullish divergence as the head was formed.

Jonathan Levinson

8/18/200, 11:30:04 AMGold is holding its losses, down 2.20 at 404.60 currently with HUI -.49% at 193.80 and XAU -.51% at 89.39. Bonds have continued their slide and are trying to firm here near the intraday lows, with TNX up 1.5 bps at 4.221%.

Jonathan Levinson

8/18/200, 11:24:50 AMQQQ is testing 33.48 supportm currently at 33.46 and looking to challenge the 33.38-.48 confluence zone. The 30 min cycle channel is still pointing steeply higher and support is up to 33.30, just below 7200-tick SMA support of 33.34.

Mark Davis

8/18/200, 11:19:34 AMHere's what I was looking at when we went long this morning... Link
The buy signals on a 1-min chart don't get much cleaner than that.

Linda Piazza

8/18/200, 11:16:42 AMAs long as the OEX maintains 15-minute closes above the Keltner line currently at 529.74, it maintains the possibility of moving toward that upper Keltner boundary, currently at 532.56. Fifteen-minute closes below the Keltner line currently at 528.61 turn the smallest Keltner channel lower again.

8/18/200, 11:05:58 AMRegarding Jonathan's 11:04 post, I'm wondering if the API has just released their crude/distillate/gasoline inventories and if they were markedly worse than the Energy Department's. I can't find API figures yet.

8/18/200, 11:03:14 AMHere's where the BIX is with relationship to that orthodox broadening formation on its daily chart: Link
Although the BIX is obviously higher today, it has not broken out of this formation as yet.

8/18/200, 10:59:29 AMReader Question: Last week I sold naked puts on the OEX for the 520 strike price. I have traded hundreds of naked puts on stocks but I wasn't sure how the OEX puts will close out. Do I have to buy them back or can they expire worthless?

Response: First, let me say that you're braver than I am, selling naked puts. It's not a tactic that I've ever felt comfortable employing, but congratulations on your profits. Assuming that the OEX remains above 520 into the close Friday (settlement is at the close of all OEX components on the exchanges on which they trade), the puts will expire worthless. They're cash settled. You didn't say whether you sold the American-style OEX puts or the European-style XEO or whether they were August puts or for some other month, but I'm assuming the American-style OEX for August. They were at 0.25 x 0.30 a few minutes ago, so some traders might elect to buy them back for this minimal (for the OEX) price and end their exposure and free up margin for another play, especially if they feel it possible that the OEX could settle below 519.75 Friday, a price that doesn't seem an impossibility, although perhaps less likely than it looked earlier in the week. Here's information: Link
I also urge you to check with your broker and satisfy yourself as to the correctness of this information.

Jonathan Levinson

8/18/200, 10:56:14 AMThe prints above 33.48 make this a bullish engulfing candle for the day, but of course the day's not done yet. 34.48 should now act as support. The short cycle oscillators are maxxed out in overbought as price struggles agains the rising 30 and 60 min Keltner channels, and I'd expect to see the advance stall out or consolidate from here, but the strong 30 min oscillator upphase from its recent upturn at a higher low is the wildcard. The outlook is bullish on a 30 min and daily cycle basis above 33.48.

8/18/200, 10:44:40 AMThe OEX's fifteen-minute Keltner chart shows the OEX trying to balance at the breakout level, and moving up from that level as I type, maintaining the possibility of reaching that 532.29 upside target. The OEX has now officially rejected the H&S on its five-minute chart. Information on crude/distillate/gasoline inventories is beginning to be released but I'm not sure that we've yet gotten the API figures and they often differ from the Department of Energy's. Note: The OEX continued rising as I typed.

Jonathan Levinson

8/18/200, 10:44:13 AMThere's the break on expanding volume. Chart coming right up. And, crude is down to 46.80, back below 47.

8/18/200, 10:41:21 AMThat 30 min cycle downphase on QQQ and the NQ futures is stalled as the 30 min cycle channel turns up. That higher low at 33.01 qualifies as the higher low discussed in last night's Futures Wrap, and on the daily chart, we're getting preliminary buy signals with Macd bullish crosses. The next step would be for a decisive break above 33.48, which has been key resistance at the top of the 33.38-.48 confluence zone.

8/18/200, 10:28:16 AMIn the overnight session, semi-related stocks tended to perform well despite some disappointment with AMAT's earnings targets. The SOX is climbing this morning, but it hasn't yet tested the 50% retracement of the rally off the October 2002 low, with that figure at 386-387 and the SOX currently at 380.55.

Jeff Bailey

8/18/200, 10:25:04 AMQQQ $33.36 +0.31% ... just off session high of $33.45 and DAILY R1.

8/18/200, 10:20:41 AMAlthough the OEX has climbed above the resistance lines I've mentioned on the 15-minute Keltner chart, it didn't close the 15-minute period above that resistance, but instead closed below it. That may change during this 15-minute period, however. That resistance line is now at 529.81, with the OEX above 530, at 530.26 as I type, and challenging yesterday's 530.54 high. This is an iffy time for both bullish and bearish traders as the OEX is now inside a resistance zone where gains might slow. The upper Keltner channel suggests a possible climb toward 532.13 if the OEX can maintain the breakout values above 530, but there's yesterday's high as resistance, a high that was just below the mid-channel level on the OEX's weekly chart, an important resistance level. We could be looking at an equal high situation, a potential double top, or a breakout situation.

8/18/200, 10:11:48 AMSession low for gold here at 404.50, and ZN bond futures are back below 113, TNX down just 1.6 bps here- could be that oversold daily cycle firming up for TNX as discussed in last night's Futures Wrap.

8/18/200, 10:02:07 AMQQQ 100-tick 2-day update at this
Link
. That 33.24 level is shaping up as resistance again.

Linda Piazza

8/18/200, 10:01:56 AMSo far today, the TRAN follows through on its potential reversal signal, opening near yesterday's close and moving lower from there. It's just above the 3028-3030-ish support, at 3035.17.

Mark Davis

8/18/200, 10:01:12 AMIt's interesting that SOX and BIX are the only two indices showing green this morning. Could this be our early warning system? TRIN is also looking bullish @ .64

Oops! Here come NDX, OEX and SPX... also now green

Jonathan Levinson

8/18/200, 9:56:39 AM30 min QQQ resistance is down to 33.35, 60 min resistance 33.44. Nymex crude is up to 47.175, current session high 47.20.

Jonathan Levinson

8/18/200, 9:55:39 AMThe Fed has just drained for the second day in a row, announcing a 3.5B to replace the 5.5B expiring for a net 2B drain.

Linda Piazza

8/18/200, 9:53:40 AMNext Keltner resistance is just above 529, up to 529.50 on the 15-minute Keltner chart, with the five-minute chart suggesting that there's little resistance up to that point and maybe up to 530.

8/18/200, 9:49:07 AMQQQ continues to climb off its 33.01 low, testing the lower opening gap resistance here at 33.14, a session high. The short cycle oscillators are not yet oversold, but they're trying to give buy signals on the wavelet upphase currently topping out. A move into the gap should be enough to print those short cycle buy signals with a move above 33.15.

Linda Piazza

8/18/200, 9:47:15 AMSo far, the OEX's behavior is mixed. It's maintaining the 30-minute 100/130-ema's, offering slight encouragement to bulls, but it's also maintaining values below channels lines that will keep the smallest Keltner channels pointed lower, offering slight encouragement to bears, too. I think indices might eventually be lower, but I'm not sure of that premise and am thinking a bounce or period of steadying might come first. I don't have a great handle on what might happen today.

We were lucky to be able to take advantage of the early weakness and initial spread of 4.30/5.10 to get a free shot at a long play. The worst we can do now is get stopped out at break even... a second 1-min MACD bullish kiss isn't hurting this trade either.

8/18/200, 9:41:25 AMThis morning's opening violated the neckline of the H&S on the five-minute OEX chart, but then values jumped right back above it again.

Mark Davis

8/18/200, 9:37:52 AM Day Trade Entry Point Alert -
Go long now... SPQHP (SPX Aug 1080 call) @ 4.80, stop 4.30
This is strictly a technical call, based on some very oversold short-term readings from late yesterday and first thing this morning.

Linda Piazza

8/18/200, 9:36:38 AMThe OEX has already slipped beneath the central Keltner channel level on the five-minute chart, but there's other support just beneath, at 526.99. If the OEX violates that and maintains level below the line currently at that level, it sets up a potential target near 525, but be careful of assuming the breakout will occur.

Jonathan Levinson

8/18/200, 9:34:56 AMQQQ has ground lower from its gap open to test 30 and 60 min channel support at 33.00, with the current session low 33.01. The 30 min cycle is vulnerable to a downphase from here, and unless we get a quick gap fill above 33.15, that downphase will continue to strengthen, setting us up for a test of 32.92 and 32.85 support.

8/18/200, 9:27:35 AMI've mentioned a couple of times watching a European technical analyst discussing crude prices on CNBC Europe a few weeks ago. That analyst mentioned a short-term target for crude at $47.50 and a top at $57.00. At the time, even though crude prices had been surging, those targets appeared almost exaggerated. They don't appear so this morning, with crude futures above $47.00 in the overnight session. Equity futures are reacting as expected, dropping with that and other news. In Europe, at least two airlines have added surcharges to cope with rising crude costs.

It's difficult to assess exactly where the SPX will open based on the action of the ES contract, and even more difficult to assess exactly where the OEX will open based on that contract, but it does appear safer to conclude that support will be tested before resistance. Unless the OEX gaps below the 30-minute 100/130-ema's (526.43 and 527.26, respectively) or plunges quickly beneath them at the open, they might provide a steadying or a bounce attempt, but one that I feel might be tepid, at least from this vantage point. See my 22:58 post for more information on my outlook.

I've been warning for a long time that readers need to watch crude futures (cl04u on QCharts for crude futures for September delivery), as rising prices will pressure the equity markets. However, beginning yesterday, I began offering a different warning. At some point, crude futures will top out for the short-term. If that analyst on CNBC Europe is correct, that short-term top may not be the final top, but at any rate, their rise has become almost parabolic and that short-term top could come any time, including at the $47.50 mark that analyst indicated. In addition, at some point, markets will begin to anticipate the top in crude prices, and will begin to discount that top, with equity indices perhaps disconnecting from their usual pattern of trading in opposition to crude futures. We may see a period when both equities and crude rises. Just remain aware of the possibility. Because so many geopolitical developments factor into the costs of crude, it's difficult to pinpoint the one moment when that disconnect will happen. Will it happen if the situation in Najaf is resolved this week? Will it happen if Yukos is purchased and markets believe the purchaser can maintain production standards? Will it happen if Jimmy Carter says that election results were on the up-and-up in Venezuela and protests magically die down? I just don't know.

Jane Fox

8/18/200, 9:19:49 AMFor anyone who missed the Market Wrap last night, that was all my doing. With Jim away we have been taking over his duties and I was supposed to take over the Market Wrap last night. Somehow I got my wires crossed and thought I was doing it tonight. Of course Wednesday night Wrap is always in Linda's capable hands. Please accept my most humble apologies.

8/18/200, 9:07:14 AMDow futures are at a session low of 9941, along with MSFT and GE. QQQ is down .18 atr 33.08 as bonds print a new high, TNX -4.7 bps at 4.159%.

Jonathan Levinson

8/18/200, 8:02:12 AMEquities are lower, with ES trading 1079, NQ 1333, YM 9948 and QQQ -.14 to 33.12. Gold is down .60 at 406.20, silver -.046 at 6.686, and 10-yr treasury futures are up .187 at 113.125, scoping session highs. Crude oil is at a session high of 47.125 on the Nymex, a new record high.

There are no major economic reports scheduled for today.

Linda Piazza

8/18/200, 7:10:12 AMGood morning. A Merrill Lynch survey of investors across the globe indicated that those investors have been liquidating their Japanese stocks. Investors who plan to increase holdings of Japanese stocks declined to 12% from the previous 15%, and those overweight Japanese stocks decreased to 37% from the previous 47%. That news and worries about fuel costs sent the Nikkei lower during the morning session, some felt, with the Nikkei opening a point underwater, gaining slightly in early trading, and then falling through the morning session. The Nikkei climbed during the afternoon session, however, closing higher by 48.29 points, at 10,774.26, on volume that was characterized as light.

Some chip stocks gained despite AMAT's disappointing earnings targets for Q4. The ongoing UFJ Holdings/Mitsubishi Tokyo Financial/Sumitomo Mitsui merger and takeover saga continued, with Sumitomo Mitsui allegedly considering a last-ditch tender offer to win UFJ from rival Mitsubishi Tokyo Financial. Mitsubishi Tokyo and Sumitomo Mitsui both closed in the green. In other stock-specific news, troubled Mitsubishi Motors revealed plans to increase sales in China, but ended the day flat. Steelmaker JFE Holdings gained after reporting earnings that showed that steel exports to Asia had risen significantly and that the company had been able to raise prices to domestic manufacturers.

Other Asian markets were mixed, although many chip-related stocks gained. The Taiwan Weighted gained 1.60%. South Korea's LG Card plummeted in early trading after Dongwon Securities warned investors that the company's debts exceeded its assets and advised those investors to lighten their positions in the company's stock. The Kospi closed positive, however, up 0.28%. Singapore's Straits Times gained 0.54%. In Hong Kong, China Mobile's earnings showed subscriber growth in a company already reputed to be the world's largest mobile phone operator on the basis of the number of subscribers. The Hang Seng fell 0.23%, however, and China's Shanghai Composite also fell, closing lower by 0.15%.

Currently, all European bourses except Moscow's trade in the red. Miner BHP fell after its earnings report, and pest-control and office-services group Rentokil fell after news that it would not put up for sale parts of its business, as expected. These revelations pressured the U.K. bourses, but rising crude prices in the overnight session also weighed on the bourses. In continental Europe, the story was similar, with Nestle's disappointing H1 results and rising oil prices pressuring markets. Nestle said that higher material costs resulted in missed forecasts for net profit and real internal growth.

Two other negative factors weighed on European markets: Google's decision to cut the price range for its IPO, and VW's warning that 2004's profits for China will fall short of last year's. Oil's impact may be the greatest, however, with Germany's Schroeder being quoted on CNBC as saying that rising crude prices may be of concern. That concern was emphasized when Air France joined Deutsche Lufthansa in adding a fuel surcharge, garnering the airline a downgrade by Citigroup Smith Barney to hold from its former buy rating. Both Air France and Lufthansa fell in early European trading.

Other company-specific news included the decision by Elan and Biogen to delay presenting data on their MS drug, a decision that sent biotech Serono higher but did not benefit Schering and Teva, other companies with MS drugs. Also of interest was the AP report that named Dutch bank and insurer ING as the Janus client planning to withdraw from the fund, with the planned ING withdrawal representing about 4% of Janus' assets. ING dropped in early European trading.

As of this writing, the FTSE 100 had dropped 16.20 points or 0.37%, to 4,342.50. The CAC 40 had dropped 14.93 points or 0.42%, to 3,518.20. The DAX had dropped 12.22 points or 0.33%, to 3,693.51.

Linda Piazza

8/17/200, 10:58:19 PMTuesday, the OEX spent most of the day trapped in a tight range between the support offered by the 30-minute 100/130-ema's and the resistance offered by the 60-minute 100/130-ema's. It produced a bearish candle that pierced the top of its recent consolidation pattern and the midline of its descending regression channel on the daily chart, but fell back below both by the end of the day. It produced a potential H&S on its five-minute chart, but did not confirm it.

Despite the potentially bearish signals, some hope of a continued rise can be found on the OEX's daily nested Keltner chart. For a second day, the OEX closed above the Keltner line currently at 526.86, the level needed in order to maintain hope of the OEX moving up toward next daily Keltner resistance zone, beginning at 534.61. The weekly chart offers a little less hope, with the OEX testing and falling back from the central Keltner channel level, with that level at 530.75, and with that level beginning a resistance zone that extends up toward 535.26. Even here, if the OEX can safely climb above the 531 level, there's hope of a move toward 534-535, but the weekly chart suggests that would probably be the limit of any upside move.

What about support? The weekly Keltner chart suggests that 519.11-519.67 might provide firm support, and we know that's a zone of historical resistance, too, so that just tells us that if the OEX should decline through the bulb of its possible "b" distribution pattern, it might again find support at the bottom of that pattern. We know that already.

Coming into Tuesday's trading, I had a fairly good idea what might happen, and the OEX followed the script rather closely. I'll tell you flat out that I don't have as good an idea for Wednesday, but I can tell you that we'll be watching those 30-minute 100/130-ema's at 526.46-527.26 to see if they hold as support on 30-minute closes and the 60-minute 100/130-ema's at 528.77 and 530.27 to see if they hold as resistance. Five- and fifteen-minute Keltner charts suggest that the OEX is likely to find support again on its first test of the 527-ish zone, unless it gaps below that support or plunges quickly through it on the opening. It might attempt a bounce from 527. Keltner charts suggest that bounces might be tempered, perhaps finding resistance near 528 or perhaps near 529. If the OEX bounces right at the open, 529 might be the first level to watch for possible resistance, and then the 530-532 level again if the OEX can get through that first resistance. Since the OEX ended the day in the middle of the smallest channels on both the 5- and 15-minute charts, it's almost impossible to predict whether it might first head for support or resistance. Perhaps much depends on what happens in the overnight sessions and how futures react to those occurrences.

OI Technical Staff

8/17/200, 8:14:25 PMThe Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in many cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Disclaimer: Stocks discussed in the
Market Monitor are for educational purposes only and any analysis is
not meant to imply a recommendation for or against that stock. The
analysts in this forum as on any other website are prohibited by the
SEC from giving any specific advice to ANY individual trader. All
information posted is for ALL readers and is not meant to be directed
to any individual. Our analysts cannot answer any email questions
regarding any specific stock. Please do not ask and please do not take
offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does
not claim that any reader achieved these exact results. Due to the lag
time between research, writing, posting, uploading, reading and
execution there will be differences between the actual signal given
and the fill achieved by the reader. Fills may be better or worse but
in most cases they will be different. The writers will make every
effort to give advance notice of intended signals and indicate
potential price targets. Your individual results may vary depending on
your activity level and aggressiveness. This forum is intended as an
education service only. Trading involves risk and should not be
attempted by anyone not ready to accept this risk. By acting on any
signal in this forum you agree and personally accept this risk.